Assume Retained Earnings on the comparative balance sheet indicated $5,300,000 a

Question

Assume Retained Earnings on the comparative balance sheet indicated $5,300,000 as the beginning balance and $6,650,000 at the end of the year. The Income Statement indicates that Net Income was $1,635,000. Use the T account below to answer the following questions. Note – The labels for each item are on the left but this DOES NOT mean the item will be on the left side (debit) of the T account.

                      Retained Earnings

Begin Balance  

Net Income

Dividends declared

Ending Balance

Include the beginning and ending balances on the correct side of the T-account

Show Net Income appropriately in the T account above.

Solve for Dividends declared.

What will be reported as “Cash paid for Dividends” on the Statement of Cash Flows?

                      Retained Earnings

Begin Balance  

Net Income

Dividends declared

Ending Balance

Explanation / Answer

Retained Earnings Debit Credit Begin Balance   5300000 Net Income 1635000 Dividends declared 285000 Ending Balance 6650000 Cash paid for Dividends will be $0. It is assumed that dividend has only been declared not paid yet

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